Monday, April 7, 2014

INDIAN MAIZE EXPORT CAN DOUBLE DESPITE ITS LONG-TERM BEARISHNESS





This is an article from Business Line ePaper appeared on 25th April, 2014 (page 14)

Please click on the following link to read :
http://epaper.thehindubusinessline.com/index.php?rt=email/viewemail&a=MjAxNDA0MjVBXzAxNDEwMTAxNw==&V=SW1hZ2U=







Tejinder Narang

India produces about 23 million tons (mts) of maize annually, consumes 19 mts and exports 4 mts.  Average yield is 2.5-ton/ hectare.  Our production, consumption and export of maize/corn are under careful watch internationally by other competing origin (USA, Brazil, Argentina, Ukraine) because India’s export intensity can scale up competitively in coming few years to nearby destinations of Far East and Middle East.  It will be the Indian David that will be competing with Goliaths of world corn trade. USA is more concerned as its share in world corn trade has declined from 63% in 2000 to 36% n 2014 as other nations have boosted their output.

Indian Agro exports have crossed $45 billion this year from about $20 billion in 2009-10. Rupee depreciation has also helped this attainment. A Crisil report of 11th March 2014 states “Agriculture growth picked up to 3.6% per year during the 10 fiscals from 2005 to 2014, from 2.9% 10 years prior to 2005 and compared to sub-1% in the 10 fiscals ending 2004. Agricultural investment, fertilizer-use intensity and credit growth stand out as three factors that improved markedly in the past 10 fiscals and boosted agricultural growth”.  This statistical narration of upward trajectory can be corroborated by expansion in rice output in eastern India, higher wheat production in MP, Gujarat and Bihar, cotton revolution and Bihar’s contribution to maize output.

Domestic demand vs. export

In the recent “Maize 14” conference of FICCI/NCDEX at New Delhi on 20th / 21st March 2014 Indian speakers were hopeful that with present tempo of growth maize production will double to 40-45mts in next five years by combination of higher yield (4-5tons/hectare) and preferably, without significantly enlarging the acreage. ( USA’s yield is maximum  10 tons/hectare while Latin American range is 5-6 tons / hectare but all of GMO variety).  Indian export surplus would be 7-8 mts. They also stressed for increasing consumption of corn through greater intake of eggs/chickens, salads, makki- ki- roti etc. for realizing elevated values in supply chain.

Foreign delegates referred to declining usage/expenditure on gasoline in USA implying lower ethanol consumption, thereby leading to softening in corn prices. (In USA 33% corn out of total production of 353 mts is used for ethanol.)  USA’s shale gas will also reduce prices of crude oil.  Lower international energy values also mean lower corn prices. USA is simultaneously strategizing shipments through shorter sea voyage channels for economizing freight to neutralize advantage that India enjoys geographically in Far-East/ Mid-East /South Asia etc.  

Thus India will be competing at bottom line values with  USA, Brazil, Argentina, and Ukraine who respectively produce and exports about 353 mts (export 42 mts), 70 mts (exports 21mts) and 24mts (exports 13mts), 30mts (exports14mts). In short, the indirect message of foreign speakers was that India should step up its domestic usage if it wants to attain higher maize production instead of relying on exports. In bearish scenario India may also have to discount for quality too because of unhygienic storage practices in Andhra Pradesh, Karnataka, and Bihar etc.

Demand for feed

Despite India’s growing prosperity of middle class, traditional demographic propensity is for vegetarian diet.   Doubling maize demand as feed ingredient in short span may not be possible.  Should the production increase, Indian domestic prices will be resilient to adapt to the changing world’s scenario.

Freely marketable

Maize trade is market centric with nil intervention from Government. Minimum Support Price of this coarse cereal generally remains a paper price and only in rare cases and years, FCI procures not more than half a million ton.  Even the inclusion of maize /coarse grain in Food Security Act is thus of little relevance.  

Export is completely free from any quotas/ registration procedure. Prices are fairly transparent in spot and future markets. Traders can trade as per their perceptions. India based MNCs can also hedge exposure both in India and through their parent counterpart abroad. No doubt, India has to expedite building up safe storage/handling capacities for ensuring quality premium on grains.

In this shackle-less environment which trade adores, additional export of about 3-4 mts (total 7-8 mts) of maize in world market of 115-120mts is realizable in the short term whatever be the demand-supply matrix of major competing nations even though India lacks economies of scale at this point of time. 

2 comments:

  1. Its very nice Information about Maize Hope to See More ,Keep Share Like this. We are Traders and Exporters Of agro Products Please Have Check On This Agro Products Thank you.......

    ReplyDelete
  2. Never heard of drip irrigation as a "backup" to rainfed. Not surprising given the high capital cost of drip. You wouldn't recover even the interest in capital invested.Natural food like bajra, almond please visit site.Bajra Cultivation

    ReplyDelete